No sign yet of post-election economy boost

Predictions of an election-led recovery in the consumer sector have failed to materialise, according to two of Australia's biggest retail names.
By · 25 Oct 2013
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25 Oct 2013
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Predictions of an election-led recovery in the consumer sector have failed to materialise, according to two of Australia's biggest retail names.

Wesfarmers chief executive Richard Goyder said the election period proved "marginally negative" for its retail businesses - which include Coles, Bunnings and Target - while Pacific Brands told investors that reports of a post-election rise in consumer confidence are not translating into sales for the owner of brands such as Bonds.

"I think it's going to take some time," said Pacific Brands chief executive John Pollaers. "I'm hopeful, but I don't think you at this stage can count on it."

Mr Goyder said sales "got a bit softer" in the weeks leading up to the election, got a boost the week after the election "and then, it's pretty quickly going back to where it was prior to that".

It may have contributed to a weaker than expected result from Coles, which reported a 4.9 per cent increase in food, liquor, and convenience sales to $8.9 billion for the September quarter, despite a significant fall in fresh food prices and general discounting.

Comparable sales from food and liquor stores - those stores that have been open at least 12 months - increased 3.4 per cent with volume growth remaining strong, particularly in fresh produce, the company said.

"Coles was the key disappointment," said Deutsche Bank retail analyst Michael Simotas.

He said the supermarket chain reported the lowest comparable sales growth since 2012. "It is difficult to assess these numbers in the absence of sales from Woolworths, but it appears that Coles' momentum may be waning, which could weigh on Wesfarmers' premium rating," Mr Simotas said.

The good news is that Mr Goyder backed predictions retail spending would not remain in the doldrums much longer. The wealth effect of higher stock, and house, prices may feed into stronger Christmas sales this year.

"I think the ingredients are there for an uptick in retail spending," Mr Goyder said on a conference call following the first-quarter sales results.

"And I think Christmas will be a good indication of that because that's when people tend to be a bit more impulsive, and so we'll see."

Food and liquor prices fell 2.5 per cent during the quarter due to "significant produce deflation" and discounting, according to Wesfarmers.

This partly reflected double-digit price declines in fresh produce, including 30 per cent price falls on some fresh vegetable lines and double-digit declines on some meat products.

Wesfarmers said Coles continued to gain market share with 700,000 more customers every week than what it experienced last year, and a slightly larger basket size per customer.

Sales from Bunnings outlets continued to underpin the group, rising 10.3 per cent to $1.99 billion while those from its underperforming department store, Target, dropped 6.1 per cent to $789 million.

Wesfarmers' discount chain, Kmart, reported a 4.6 per cent increase in sales to $970 million.
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